Expectations of an early rate hike are receding among some economists in India, as consumer price growth remains contained. The June consumer price index rose 4.38 percent year-on-year, exceeding the Reserve Bank of India's 4 percent target for the first time in 17 months, but the average for the April-to-June quarter was just 3.9 percent. Citi noted that inflation for the current fiscal year could average 4.7 percent, below the central bank's forecast of 5.1 percent, and indicated that the need for an early rate hike has diminished. In the interest rate swap market, the implied rate hike for this fiscal year has shrunk to 50 basis points, down from 125 basis points before the June meeting. SBI Economic Research expects rates to remain on hold this fiscal year, while ANZ and STCI Primary Dealer have also withdrawn their rate hike forecasts.
Citigroup Inc.